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Local Governments & Remote Sales Tax Collection

Today representatives from the National Association of Counties, the National League of Cities, the United States Conference of Mayors and the Government Finance Officers Association submitted a letter to the House Judiciary Committee in support of three bills in the House of Representatives and the Senate which would allow states and local governments to collect taxes on remote sales – particularly those made electronically. Taxing e-commerce has been a contested issue since the emergence of online shopping in the 1990s. Given the ever-evolving nature of e-commerce technology and the ever-worsening state and local government fiscal crisis unfolding across the country, proponents of remote sales tax collection argue that it now time to reconsider the related legal standards.

Specifically, the letter calls for a reconsideration of the Supreme Court’s holding in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which held that a vendor whose only connection with customers in a taxing state is by common carrier or mail is free from state-imposed duties to collect sales and use taxes because such a vendor lacks the substantial nexus with the taxing state as is required under the Court’s Commerce Clause jurisprudence. That decision also held that Congress is free to disagree with the Court and to decide whether, when and to what extent the states may burden interstate commerce with a duty to collect sales and use taxes.

One thought on “Local Governments & Remote Sales Tax Collection”

I have a real problem with taxing sellers on the internet. No nexus means no significant reliance on state/local infrastructure or services (well-trained workforce provided by state schools, police, fire, emergency services) and depending on their contractual language, not even a reliance on the local judicial system. I don’t see why they should be paying/collecting sales taxes if they don’t have a nexus. They’ll pay federal taxes which should cover their share of any resources they use servicing their internet customers (highways, common carrier, etc.).